How Important Is Your Credit Score?

by mike on August 3, 2012

In the personal finance world, the credit score is one of the most talked about topics. Some financial experts practically salivate when it comes to discussing credit score. It is probably the topic most often brought up by my financial clients as well. Many are surprised when I tell them I really don’t care about their score.

My philosophy is that if you do the things I teach, you are not going to be very concerned about your financial score either. In fact, my goal is to get it to 0 as quick as I can. We still have our mortgage, but other than that, we have had no debt for about seven and a half years. Hopefully, we will not have a mortgage within another seven years or so.

Based on how the FICO score is calculated, both Mandy and I’s credit score will drop quickly after we no longer have ANY debt. I can guarantee I will not be losing any sleep over that!

The main concern I get from clients is what will happen if they want to get a loan if they are not concerned about their credit score. My first response is that hopefully you don’t want to get any more loans. If you follow what I teach, you will not. But, let’s say you need to get a mortgage in the future (I’m ok with that). A recent article at smartmoney.com discussed that most banks look at much more than credit scores now. They actually look at things such as net worth, income, etc. to determine if someone is a good candidate to get a loan.

The bottom line: to answer the question “How important is your credit score?”, it depends. It depends on what your overall financial goals are . If you want to continue to use debt, then it is extremely important. If, however, you don’t plan on having debt in your life, then it should not really be that important. It’s certainly not to me!